The Supply of Information Technology Workers in the United States
Chapter 1: Political Context
What Is This Report's Evaluation of Earlier Studies?
Human resource issues related to information technology have frequently been on the national agenda since the early 1960s, when the National Academy of Sciences (NAS) and the National Science Foundation (NSF) began preparing studies and collecting data on this subject. These efforts supplemented data that have long been collected by the Bureau of Labor Statistics (BLS).
The most recent national debate began in 1997 with a report prepared by the Information Technology Association of America (ITAA), a trade association representing 11,000 companies. ITAA reported a large shortage of IT workers in large and mid-size U.S. companies. In 1998, ITAA published a second report based on a larger sample of companies, which indicated an even more serious shortage of workers. The Department of Commerce's Office of Technology Policy then issued a report that largely mirrored the conclusions in the original ITAA report. The General Accounting Office (GAO) criticized the methodology used to gather the data put forward by both ITAA and Commerce, and questioned their conclusions about a shortage. Individuals and private organizations weighed in on the debate, which quickly crystallized around proposed legislation to increase the number of temporary H-1B visas that could be awarded annually. Compromise legislation was passed by Congress in October 1998 and subsequently signed into law.
However, it is clear that this legislation does not end the national discussion of IT workers. The legislation is temporary, lasting only three years, and it addresses only one aspect of this complex labor issue. Questions about the treatment of older IT workers, for example, were largely ignored in the H-1B debate. The importance of IT workers to national competitiveness and national wealth, and the dynamic nature of information technology, which is rapidly being incorporated into every sector of the U.S. economy, strongly suggest that issues surrounding the IT workforce will be part of national policy discussions for years to come.
Although this report primarily addresses current and future issues about IT workers, this chapter is devoted to an examination of some aspects of the political context concerning IT workforce issues in the United States. This analysis begins with a review of some of the arguments presented in the ITAA and Commerce reports.
The discussion will focus primarily on vacancy rates, which are used as a principal kind of evidence in the two ITAA studies.1 GAO argued that the low response rates and small sample sizes made the results of these surveys highly questionable.2 It is true that the results might be skewed because companies that were experiencing more serious shortages may have been more likely to respond. However, there is no hard evidence from any statistically valid study that refutes either the ITAA results or the presence of an IT worker shortage. While the ITAA results may not have the weight of scientific evidence, they do suggest that many U.S. companies are having difficulties filling their IT positions. This evidence is consonant with many other anecdotal reports heard while researching this study.
This finding is bolstered by a GAO observation that the unemployment rate for IT workers was only 1.3 percent in 1997, which is much lower than the 4 percent often considered by economists to represent "full employment." In fact, even when the IT unemployment rate hit its historical high for recent times3 percent in 1991it was below the 4 percent threshold indicating full employment. This is perhaps to be expected, given that most professional occupations that are filled primarily by highly educated workers have low unemployment rates.3 Since 1987 the IT unemployment rates have tracked up and down in parallel with the national general unemployment rate, although the IT rates are consistently lower by a factor of 2 to 3. Given that the general unemployment rate is currently at a 25-year low, it is not at all surprising that the IT labor market is experiencing some tightness.
The Department of Commerce report,4 like the first ITAA report, compares the projected number of IT jobs to the supply as an indicator of a shortage. For demand, Commerce used a Bureau of Labor Statistics (BLS) projection that between 1994 and 2005 the number of IT jobs in the United States would increase annually by 95,000. Commerce contrasted the projected annual increase in demand with data from the National Center for Education Statistics (NCES). The NCES data indicated that only 25,000 bachelor's degrees in computer science are produced annually in the United Statesand that these numbers have been steadily decreasing from a high of 42,000 in 1986 (a 40-percent decline).
GAO rightly criticized Commerce's argumentby noting that there are additional kinds of formal computing training besides bachelor's degrees, such as associate degrees and certificate programs, that prepare people for IT careers; and also that most IT workers receive their formal education in fields other than computer science. In consonance with GAO's line of reasoning, this study group believes that to understand whether there is an IT worker shortage, one must consider both the multiple sources of supply and the various occupations for which each of these sources prepares an IT worker. There are many IT jobs, such as help desk attendant or Web designer, for which an undergraduate computer science degree is neither common nor appropriate training.5 Another problem with the ITAA line of reasoning is that the decline in the production of bachelor's degrees in IT-related fields has ended. There was a very significant national upswing in the number of students entering bachelor's degree programs in computer science in 1997 and 1998. The CRA Taulbee Survey of Ph.D.-Granting Departments of Computer Science and Engineering indicates that new declarations of majors in computer science at the bachelor's level have doubled over these two years, and much higher graduation numbers can be expected as these students complete their undergraduate degrees. Enrollments still are not as high as they were at their peak a decade earlier, however.
As another indicator of a shortage, the Commerce report cited the fact that some U.S. companies were outsourcing work to other countries. GAO correctly observed that the statistical data to support this claim are not compelling. The Commerce report discussed the size of the IT workforce in other countries, such as India, and mentioned percentages of that country's IT work being done for export. However, it was difficult to apply these statistics meaningfully as an indicator of a worker shortage in the United States. It would have been useful to have statistics about the percentage of IT work for U.S. companies being outsourced overseas and how that percentage has changed over time. The significance of even these statistics, however, would not be unambiguously clear. Outsourcing is a tried-and-true method used by companies for financial and other reasons, and the presence of outsourcing does not, in itself, represent evidence of a worker shortage. Outsourcing outside of the United States may be an indicator of limited U.S. capacity to do this work, but it is hard to tell without further examination. For example, the lower cost of having programming done overseas or the desire of a company to establish a presence in a particular country might be reasons for foreign outsourcing that have nothing to do with a shortage of American workers.
The final argument given by Commerce as evidence of a worker shortage is the increase in salaries of IT workers. The report cites three private studies of IT worker compensation that show annual salary increases in 1996 and 1997 averaging between 7.4 percent and 20 percentmuch higher than the overall average increase in compensation for U.S. workers (4.1 percent). GAO gives two counter-arguments. The first is that this may be evidence of a tightening labor market rather than an actual shortage of workers. On this point, GAO's argument may be focused too much on the near term. Regardless of whether there is a 'shortage' or merely a 'tightness' today, if the demand for IT workers continues to grow rapidly in the next decadeas the BLS itself predicts and our study group expectsany tightness would soon become a shortage, unless supply can find a way to keep up with demand.6
GAO's second criticism was the use of BLS data to argue that IT occupations have, at best, merely kept pace with average salary increases in the professional and specialty occupations overall from 1983 to 1997 (although IT workers started from a considerably higher base salary). One problem with this argument is that BLS data are strongly at odds with private data, such as employer compensation surveys. One reason may be that the private studies take bonuses and stock options into consideration, whereas BLS considers only base salary. There is anecdotal evidence that spot shortages have driven up salaries. Two or three years ago, for example, new graduates with a bachelor's degree in computer science were being offered starting salaries up to double the average of their peers if they were experienced in building local area networksa new skill that was then in short supply. Some schools are reporting a similar increase today in salary offers for students graduating with experience in information security.
Most people interested in this labor issue have focused on the differences between the positions taken by Commerce and GAO, but there are, in fact, many areas of agreement. GAO has publicly stated, for example, that it agrees with the Commerce report on past and expected growth in demand for IT workers, current low unemployment rates for IT workers, and the need for a better understanding of supply-demand dynamics and better categories and data in order to develop good policy.
How Does Recent Legislation on H-1B Visas Affect Any Shortage?
This study group did not take a position for or against the legislation that temporarily increased the number of H-1B visas that may be awarded annually.7 Nevertheless, a number of points can be made about the likely effects of this legislation on the IT workforce.8
- Given that there is a sunset clause in the legislation that increases the cap, this legislation will clearly not be a long-term factor unless it is renewed.
- The number of IT workers entering the United States under the H-1B program is and will continue to be a small percentage of the total IT workforce in this country. According to BLS, there are approximately two million IT workers in the United States. The limit on the number of workers of all types entering this country on H-1B visas was 65,000 per year. This limit will increase to 115,000 for 1999 and 2000, before dropping back to the 65,000 level. H-1B workers enter a number of occupations, such as baker and fashion model; not all of them are IT workers. The best estimate from unreliable data is that from 20,000 to 25,000 of these 65,000 visas have been going to IT workers, and it is difficult to predict how many will go to IT workers in the future. Since the visas are temporary, the workers can stay in the country on this visa for only six years. In fact, a number leave before their visas expire. For these reasons, H-1B workers are likely to represent a small portion (perhaps less than five percent) of the national IT workforce.
- Of H-1B workers who do IT work, there is no good evidence about where they are likely to be employed or what effect they will have on the domestic IT labor pool. The specific kinds of IT work they will do is unknown. The top ten users of these visas in the past have been companies providing contract labor and services. By far the largest user has been the Mastech Systems Corp. in Pittsburgh, which has received visas for 1,733 of its employees80 percent of its workforce. These workers are virtually all programmers who hold a bachelor's degree as their highest level of education. However, there is also some demand for H1-B workers in more highly skilled, higher paying positions. They include research scientists in industrial research laboratories or faculty members in research universities, where they serve the nation by creating new technologies that generate national wealth and by training the next generation of IT workers. For example, Intel Corp. says that, of its 67,000 employees, about 3 percent have been hired using H-1B visas, and nearly 80 percent of these hold a master's or doctoral degree. There is no way to determine whether the larger number of temporary workers entering the United States under the expanded program will continue to be employed by companies like Mastech or by companies like Intel.
- The cost of the visa, which approaches $15,000 when legal fees are included, limits the extent to which H-1B visas will be used to fill lower-skill positions.
- The attention paid to the H-1B visa has obscured the existence of another major source of skilled foreign labor, including IT workers. The TN visa (commonly known as the 'NAFTA visa') permits unlimited numbers of Canadian IT professionals to enter the United States for work, and it will offer similar opportunities to Mexicans beginning in the year 2003. There is some evidence that a brain drain of IT workers from Canada is hurting the Canadian IT industry.9
- Making the increase in the number of visas awarded under the H-1B program a temporary measure is well justified. It is very difficult to accurately forecast national shortages. Witness the NSF forecast in 1990 of a "shortfall" of scientists and engineers in general, which did not materialize; in fact, many people now believe there is an oversupply. Generally speaking, legislation has never been a very effective tool for balancing supply and demand in any occupation. It is possible to harm the indigenous supply system by bringing in too many foreign workers. It is also possible that foreign workers are filling positions that might otherwise have been filled by American citizens, such as older electrical engineers who have lost their jobs in the downsizing of the defense industry, although the study group uncovered no hard evidence of this. A limited-term increase in the temporary visa program will provide an opportunity to study some of these issues before any additional immigration legislation is considered.
- The current legislation may serve well to ameliorate the current, but episodic, demand for IT workers caused by the Y2K problem by covering some of the total demand for IT workers (but not necessarily by doing Y2K work itself). For reasons that are explained elsewhere in this report, the demand for IT workers will probably continue to grow steadily and rapidly over the coming decades. In fact, because information technology affects so many sectors of American industry, the growth in demand for IT workers is likely to continue unabated, even in times of general economic malaise or when IT companies themselves have a downturn. Thus, in the long term, the country will have a large capacity to absorb new workers from both domestic and foreign sources. Y2K is a special and important problem, but it is temporary. It represents a sharp, short-term peak on the long upward curve of continuing, long-term demand for IT workers. There will be other short-term peaks as well, such as the end-time date for Unix systems early in the next century. While eventually there will be a sufficient growth in demand for IT workers that the U.S. economy could possibly absorb all of the foreign workers hired to fix Y2K problems, it is unclear whether there will be some temporary displacement of IT workers after this short-term crisis is over. To lessen the risk of displacement of American workers, it appears to be sound policy to fill some of this short-term spike in demand for the Y2K problem with temporary foreign workers.
To complete this discussion of the H-1B issue, it is useful to compare this visa program with legislation in 1989 dealing with labor shortages of nurses reported by some hospitals and other employer groups. The history of this legislation and its effects on the shortage of nurses is an illustrative case study for understanding the IT worker shortage. In fact, this H-1A visa legislation for nurses provided the structure for the legislation in 1990 that created the H-1B visa program. The case study is recounted in box 1-1.
1 Help Wanted: The IT Workforce Gap at the Dawn of a New Century. Information Technology Association of America. Arlington, Virginia, 1997; Help Wanted 1998: A Call for Collaborative Action for the New Millenium, Information Technology Association of America and Virginia Polytechnic Institute and State University, March 1998. A more detailed critique of the first ITAA report is given in the paper by Barnow, Trutko, and Lerman. It persuasively argues that there are methodological problems with one after another of the kinds of evidence of shortage given in the ITAA report.
2 See, for example, United States General Accounting Office, "Information Technology: Assessment of the Department of Commerce's Report on Workforce Demand and Supply", GAO/HEHS-98-106, March 1998; GAO, "Information Technology Workers: Employment and Starting Salaries", GAO/HEHS-98-159R, May 1998.
3 According to a data brief from R. Keith Wilkinson of National Science Foundation, Science and Resource Studies, the unemployment rate for science and engineering degree-holders was less than half the overall national average: 2.2 percent for those working in science and engineering, and 2.8 percent for science and engineering degree holders in non-science and engineering occupations, versus 5.6 percent for the U.S. labor force as a whole in 1995. See http://www.nsf.gov/sbe/srs/databrf/sdb/98325.htm for details.
4 U.S. Department of Commerce, Office of Technology Policy, Department of Commerce, "America's New Deficit: The Shortage of Information Technology Workers", Fall 1997.
5 Brian Hawkins, the president of EDUCAUSE, has noted that there are reasons why IT jobs that do not require a computer science degree are advertised with this degree requirement: "often HR personnel do not fully understand such issues all that well, when job specifications and job descriptions are written. Sometimes this is done in an attempt to artificially elevate the position deliberately, in an effort to get the position graded at a level that the salary could attract reasonable candidates, who may or may not have such qualifications." Private e-mail communication to CRA, March 8, 1999.
6 BLS has projected that between 1996 and 2006 the IT-related occupations (i.e., computer systems analysts, engineers, and scientists) will grow by 107.6 percent, compared to only 14 percent job growth overall in the United States. BLS, Monthly Labor Review, November 1997.
7 For a discussion of the legislation that increase the annual cap on H1B visas, plus a labor perspective on the legislation, see Greg Gillespie, "Congress Expands H-1B Visa Program," IEEE, The Institute, December 1998, p. 1.
8 For another view on H-1B, Y2K, and the larger, long-term issues of IT workers, see Howard Rubin, "The United States IT Workforce Shortage," Dr. Dobb's Journal Fall 1998, on the Dr. Dobb's website at http://www.ddj.com/articles/1998/9814/9814b/9814b.htm
9 On the IT worker situation in Canada, see Software Human Resource Council's report "Taking Action on Canada's IT Skills Shortage" (http://www.shrc.ca/Taking%20Action/front_page.htm); SHRC's Occupation Skills Profiles Model (http://www.shrc.ca/SHRCNews/opsm/); the Canadian Advanced Technology Association's call to "double the pipeline" (http://www.cata.ca/cata/advocacy/skillshortage.htm); and the British Columbia Technology Industries Association report "Technology Industries in BC: A 1997 Report Card" (http://www.bctia.org/industry/report/).
10 Gary B. Read and Demetrios G. Papademetriou, "U.S. Legal Immigration Reform: Recent Developments", cited at pp. 12-13 of Advisory Committee report.
11 Ibid., p. 5.
12 Ibid., p. 6.
13 Ibid., pp. 7, 31.
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Document last modified on Wednesday, 04-Apr-2012 06:51:20 PDT.